A myriad of economic problems awaits President Bola Tinubu’s ministerial nominees when they are eventually unveiled by the nation’s National Assembly any moment from now. These perennial problems include the over 100 million Nigerians who are multi-dimensionally poor, high unemployment rate, inflation rate, low capital importation, insecurity, huge debt service as well as low agricultural productivity.
Economic tensions in Africa’s biggest economy, Nigeria, became intensified as the new federal administration kicked off its economic reforms, beginning with the removal of subsidy on petroleum products, and the unification of the multiple exchange rates, moves that have further added pressures to the rising inflation rates in the country.
In June 2023, the National Bureau of Statistics (NBS), Nigeria’s data agency, announced that the headline inflation rose to 22.79 percent last month, making it the seventh straight month inflation would rise in the country. Food inflation rose the most at 25.25 percent on a year-on-year basis. Urban inflation rate for June 2023 was 24.33 percent while the rural inflation rate for the same month was 21.37 percent.
The removal of subsidy has caused a spike in petroleum products’ prices, especially the premium motor spirit (petrol), which surged from N189 before subsidy removal to N511 a litre in June and later to N617 per litre by mid-July. At N650 per litre in some states of the federation, sales of petrol, according to some marketers, have declined by as much as 50 percent.
The rising inflation rate has already had devastating effects on the level of poverty. The World Bank made reference to the increasing number of Nigerians sliding into poverty in its Nigeria Development Update for June 2023 tagged “Seizing the Opportunity.”
“The CBN implemented measures to control rising inflation, including raising the monetary policy rate by 700 basis points (bps), but these proved ineffective and monetary policy remained loose overall in the first half of the year. The loss of purchasing power from high inflation has increased poverty in the short-term, pushing an estimated 4 million Nigerians into poverty between January and May 2023,” World Bank said.
The naira appreciated against the US dollar to close at the official exchange rate of the naira to the dollar at N768.16 on 20 June 2023 at the Investors & Exporters’ Window as stated by FMDQ Securities Exchange Limited.
“Currency market distortions contributed to weak growth, the fragile fiscal position, and high inflation. Before the major FX reforms implemented on June 14, the CBN only allowed a slow depreciation of the official exchange rate, which was insufficient to bring the supply and demand of foreign currency into balance, placing increasing pressure on the exchange rate in the parallel market,” the World Bank said.
Economic growth has not been impressive, based on the real GDP growth rate. The Nigerian economy grew in real terms by 2.31 percent at the end of the first quarter of 2023, which was lower than 3.11 percent as of Q1’2022, and the real 3.10 percent growth rate that was recorded in 2022.
Capital importation into the country was flat at $1.13 billion as of Q1’2023. It was $5.33 billion in 2022; $6.7 billion in 2021, and $9.66 billion in 2020. All these are a far cry when compared to $23.99 billion capital imported in 2019 and $16.81 billion in 2018.
Insecurity has crippled agricultural productivity in Nigeria. UNICEF estimated that 25 million Nigerians are at the risk of facing hunger unless urgent actions are taken.
“Food access has been affected by persistent violence in the north-east states of Borno, Adamawa and Yobe (BAY) and armed banditry and kidnapping in states such as Katsina, Sokoto, Kaduna, Benue and Niger. According to the National Emergency Management Agency, widespread flooding in the 2022 rainy season damaged more than 676,000 hectares of farmlands, which diminished harvests and increased the risk of food insecurity for families across the country,” UNICEF stated.
The body added that 6 million out of the 17 million insecure Nigerians live in Borno, Adamawa, Yobe, Sokoto, Katsina and Zamfara states.
Debt servicing gulps a huge amount of Nigeria’s revenue as it was reported that 96 percent of Nigeria’s earnings goes into debt servicing. According to data on debt servicing as published by the Central Bank of Nigeria, the nation paid $1.169 billion to service debt between January and June this year. In 2022, the country paid $2.49 billion in 2022; $2.126 billion in 2021; $5.767 billion in 2020; $1.34 billion in 2019.
Concerning unemployment, the global audit and tax advisory firm, KPMG predicted that Nigeria’s unemployment rate would rise to 40.6 percent in 2023 as against 37.7 percent in 2022, citing factors such as low private sector investments, low industrialisation, and unimpressive economic growth rate, inhibiting the country’s ability to absorb about 5 million new entrants into the nation’s labour market.
